Ministry of Commerce And Supplies - Enhanced Integrated ...

N T I S201015) Information Technology and Business ProcessOutsourcing ServicesBackgroundTechnological advancements over the last years have opened up opportunities for trade in informationtechnology (IT) and business process outsourcing (BPO) services. This includes a wide range of services, fromlow-skilled services, such as data entry or call centres to high-skilled services, such as software development,graphic designing or medical prescription transcribing. What all these activities have in mind is that they canbe traded internationally via telecommunication networks and that they are labour-intensive. This can opentremendous opportunities for a landlocked, low-wage country like Nepal, and there are promising signs thatentrepreneurs have started to export such services from Nepal.The GoN sees IT and related export services as a priority area. There has been an increase in both homegrownbusiness and foreign subsidiaries in the IT sector over the past few years, the domain of work being dataprocessing, call centre operations, medical prescription transcribing, map digitization, animation, etc. Theavailability of qualified graduates with English proficiency, expansion of communication facilities, and lowlabour costs have attracted many local as well as foreign investors and has helped this sector to grow fast.However, a lack of required infrastructure, corporate practice, and quality control measures, including limitedinternational standards/certifications like ISO 9001, and a low scale of transactions have not only forcedthis industry to struggle in the competitive market, but also restricted Nepal from participating in biggeropportunities. Furthermore, existence of incoherent standards of education offered by different universitiesand an insufficient supply of qualified personnel, as well as a lack of research and development (R&D) assistanceat universities has constrained growth. But the overall outlook for the industry looks very promising.Index 1: Export PerformanceExport Value: No reliable data is available about the export value of the IT sector. A lot of companies are verysmall and may not be registered. The services are usually provided ‘cross-border’, with obvious problems inmeasurement. An extensive study undertaken in 2004 came to the conclusion that the annual export valueof IT services was US$5.4 million (Mount Digit Technology [MDT], 2004). The discussion about an estimatedexport value with a couple of surveyed firms has shown a figure far less than the MDT estimate of US$5.4million, indicating the need for an extensive survey to quantify the actual exports. We assume that the currentvalue is significantly higher than that. There are at least 10 large companies with 50 or more employees, plus alarger number of small companies that often consist of 15-20 people. From discussions with industry experts,our estimate for the number of employees in the IT and BPO export sector is 2,500. A respondent at the HighLevel Commission for Information Technology (HLCIT) estimated the current export revenue at US$10 million.This estimate is likely in the right order of magnitude. One of the companies visited during the fieldwork (seeBox 2.1) has an export value of around US$1 million and several such companies with a similar size exist.Box 2.1. A Nepalese IT success storyThe ITC team visited IT/Grafi Offshore Nepal, a joint venture between Nepalese individuals and a Belgian IT company, which started in 2002.Currently, it employs 100 professional staff, around half of whom work as programmers and the other half as graphic designers. Marketingis provided by the Belgian counterpart and most of the clients are in Europe. The Managing Director is very optimistic about the developmentof this sector. In fact, one of the problems is the tough competition for skilled workers, which shows that the sector is thriving. Programmersearn US$600 per month on average, which is a very high salary by Nepalese standards, and it can even be signifi cantly higher, depending onthe skills. All work is done for foreign clients.100NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT